Brussels, 04/01/2006 (Agence Europe) - Moscow and Kiev finally reached an agreement on the price of gas during Tuesday night after several weeks of discussion to resolve the dispute between Ukraine and the Russian gas giant, Gazprom (that wished to put the price of Russian gas up more than fourfold than the price practised on the world market for gas intended for Ukraine) and after Gazprom launched an operation last Sunday to lower the pressure in Ukraine's gas pipeline system in order to allow only gas flows intended for the Union (which was, however, momentarily affected). Ukraine finally came into line with the price conditions imposed by Russia: Naftogaz (the Ukrainian gas company) and Gazprom concluded a five-year contract fixing the price of gas at $230/1000 m3, compared to the 50 dollars that Kiev has paid to date. Although Gazprom obtains the market price it requested, Ukraine will now receive gas at $95/1000 m3, the difference being absorbed by the joint Russian-Ukraine company, RosOukrEnergo. Gazprom will be selling its gas at the price of $230 to RosOukrEnergo which will then blend it with a cheaper gas from Turkmenistan, Kazakhstan and Uzbekistan. The Russian gas intended for Ukrainian consumers will therefore reach the Russian-Ukrainian border at a price of $95/1000 m3. The agreement provides for a rise in price for Russian gas transit through Ukraine. It was hitherto $1.09 for 1000 m3 over 100 km, but Russia will now have to pay $1.60.
Silent at the outset of the dispute, then concerned by the implementation of Gazprom threats to break off gas supplies, the European Union, which depends on Russian gas for one quarter of its supplies (supplies in several member States fell between last Sunday and Monday; mainly falling by 40% in Hungary and then by over 30% in Austria, Slovakia and Poland: see EUROPE 9901), welcomed the Russian-Ukrainian agreement. During a press conference after an exceptional meeting in Brussels of the group for coordinating gas supplies composed of experts from Member States energy ministries and representatives from the energy sector, the Austrian minister for the economy and president-in-office of the Council, Martin Bartenstein, welcomed, on 4 January, the positive and prompt response to the appeals made by the Union to Moscow and Kiev to rapidly settle their dispute to ensure that gas supplies are maintained. Mr Bartenstein also recalled how important it is for the Union to maintain the role of Russia and Ukraine as safe, long-term suppliers of gas to Europe, before going on to give his assurance that the very brief interruption in Russian gas delivery caused the Union great concern. In this dispute, the minister went on to say, it is good for the EU and for Russia and Ukraine that the war hatchet has now been buried. Although the price dispute is not completely over, there is a good basis for the future and a real lesson has been learnt, he said. “It was vital that a solution should be reached rapidly. The companies concerned by the conflict have proven their determination to be responsible and to ensure supply security”, Energy Commissioner Andris Piebalgs commented. The Commissioner also explained that the shortened meeting of the gas coordination group had allowed Member States to take stock of problems encountered over recent days, in the greatest transparency.
The EU is nonetheless concerned that lessons should be drawn from the crisis that underlined the failings in its energy policy. “The problem is not completely behind us. We must discuss what has happened over recent days very seriously, as many European countries suffered a reduction in their gas supply, for the first time in 40 years”, Mr Bartenstein warned before going on to add that “important conclusions” should be drawn, mainly with a view to the European Spring Summit where energy policy will be high on the agenda. Stressing the effectiveness of Commission/Council cooperation during the Ukrainian Russian dispute, albeit commercial but with major political consequences, and the energy dialogue with third countries, Mr Piebalgs stressed the need for greater European cooperation on the question of energy supplies which is currently and above all dealt with at national level. The Commissioner above all stressed the need to restrict energy consumption in order to reduce Community dependency, but also to promote renewable energies, a field in which the Union is far from its goal. “We have had a decade of liberalisation, improved competitiveness, and now we must focus more on supply security and on the type of diversification of energy sources that we want”, Mr Bartenstein said. “Gas and oil supply security will certainly be a major issue in coming months”, he added, before going on to conclude that, as Russia has shown proof of great reliability over the past 40 years, “Russian gas will remain one of the pillars for European gas supplies”.